Property prices bounce back
Early signs encouraging for minimal post-Covid real estate slump. Debbie Jamieson reports.
As New Zealand emerged from level 4, Auckland nurse Frances Crane was desperately looking for a new home. She had sold her house the day before lockdown and was transitioning into a high-priced short-term rental market.
Online searches for a twobedroom home offered few options and the flood of homes for sale she anticipated as the country shifted down levels never arrived.
Eventually she spotted a place in Hobsonville that ticked all the boxes. She knew she wasn’t the only potential buyer and secured the property with an offer in the high-$700,000 range.
‘‘I didn’t get a bargain but I paid a fair price for it,’’ she said.
Crane’s experience reflects many throughout the country as participants in the property market express surprise at the stability in sale prices and begin to question whether the ‘‘doom and gloom’’ scenario painted by many economists will arrive.
Official sales figures for May are not due out until next week but real estate agents are reporting an unexpected high level of activity and strong prices.
Ben Macky of Auckland real estate firm Wallace Stratton said when Covid-19 hit he was predicting a very difficult year but since coming out of lockdown the company has seen multiple offers on properties and some selling for much higher prices than expected.
‘‘There’s absolutely an appetite for property. Buyers are willing to spend money. We are consistently writing more deals than what we would have expected.’’
The biggest handbrake was a reluctance from banks to lend to people in industries perceived to be risky such as hospitality, aviation and real estate, he said.
Managing director of Auckland’s largest real estate firm
Barfoot and Thompson, Peter Thompson, said his company’s sales in the past two weeks were ahead of figures during the same period last year with median prices in May at $914,000 – only slightly below the March peak of $925,000.
‘‘The market has rebounded really well, but we say that with caution,’’ he said.
Some sales made immediately after lockdown were from people who had sold but hadn’t bought, some were sales prior to Covid-19 that had not settled and, in some cases, people’s circumstances had changed with border restrictions.
‘‘I think as we come out of June we’re still going through a bit of an unsure time.’’
Economists predict house prices will drop somewhere between 5 per cent and 15 per cent this year prompted by falling Gross Domestic Product (GDP), mortgage holidays coming to an end, unemployment rising and tighter household budgets.
However, there are positive factors including low interest rates, a government spend-up and the general resilience of our financial system.
Economist Tony Alexander says people seem to have a more optimistic outlook than expected in a recession and this is important in the real estate market where attitudes drive decisions.
They are ‘‘pushing through the misery’’ and focused on better conditions late in 2020 and early 2021, he says. ‘‘This is why asset price weakness is likely to be substantially less than many might be thinking, and opportunities for low-priced purchases short-lived in duration.’’
The Queenstown market is widely predicted to be negatively affected by Covid-19, with its heavy reliance on tourism.
Infometrics is predicting a potential drop in the district’s GDP of 23 per cent and already thousands of jobs have been lost, but Harcourts Queenstown agent Kirsty Sinclair says that is not yet having a negative effect on the property market.
‘‘In the last three weeks we’ve been really surprised by how active it is.’’
Only last week a home and income property in Shotover Country had six bidders and sold for a record price for the suburb at $1.42 million.
A Bayleys auction featuring 19 residential properties in Queenstown had limited success with only three sales on the day but it is understood at least another two had sold since.
Sinclair says buyers are cautious and waiting to see if prices drop, but there’s no sign of bargains yet. ‘‘Right now, when buyers are most hesitant, what we’re seeing is giving real confidence.’’
Thompson says his gut feeling is that sales volumes in Auckland will likely be down a bit on last year and prices will not drop more than five per cent after a few ‘‘ups and downs’’.
Where Auckland tends to be three to six months ahead of the country, he expects the postCovid economy will see changes
happening at a similar pace across the country – except Wellington where the governmentbased employment market tended to provide more stable real estate prices.
Others are not so optimistic. CoreLogic economist Kelvin Davidson has warned current activity is a ‘‘line in the sand’’ and the market should prepare for more houses to be sold at a loss.
Real estate data firm QV says the property market is on the brink of a material drop in prices for the first time in nearly 12 years.
Real Estate Institute of New Zealand chief executive Bindi
Norwell says it’s too early to draw definitive conclusions and the market won’t find its new ‘‘normal’’ pattern until the end of the year with the conclusion of mortgage holidays likely to be a key factor, she says.
There are some ‘‘tyre-kickers’’ looking to pick up properties at bargain prices but for Frances Cook the cost of waiting to see whether prices would drop was offset by rent costing ‘‘an arm and a leg’’.
‘‘I’ve bought and sold a few houses before. You win some and lose some but you’ve got to be happy with where you’re living and make a long term decision.’’